The archived blog of the Project On Government Oversight (POGO).

Dec 11, 2007

Are federal prosecutors using corporate crime prosecutions to reward cronies?

That seems to be the case in New Jersey, where U.S. Attorney Christopher Christie appointed his ex-boss, former Attorney General John Ashcroft, to be the corporate monitor of a company involved in a $311 million deferred prosecution agreement (pdf) with Christie’s office. The company in question, Zimmer Holdings, along with several other medical equipment manufacturers, was accused of paying kickbacks to get doctors to use their artificial hip and knee reconstruction and replacement products.

Ashcroft’s consulting firm, the Ashcroft Group LLC, will earn between $29 million and $52 million (paid by Zimmer Holdings) to serve as a corporate watchdog for 18 months. It will oversee Zimmer Holdings, making sure it does not engage in misconduct and helping it adopt corporate reforms. As head of the Department of Justice, Ashcroft was Christie’s boss from 2002 to 2005. Christie also served on an advisory panel that consulted regularly with the Attorney General.

Two members of the New Jersey Congressional delegation, Reps. Bill Pascrell, Jr. (D) and Frank Pallone, Jr. (D), have expressed concern over the deal and are seeking hearings on deferred prosecution agreements and the process by which corporate monitors are appointed. What particularly worries Reps. Pascrell and Pallone is the lack of transparency and oversight.

Deferred prosecution agreements (and a variant called non-prosecution agreements) are a new weapon gaining in popularity among federal prosecutors. They are starting to show up in POGO’s Federal Contractor Misconduct Database. Deferred prosecution agreements usually involve court involvement or oversight. However, the deal arranged in the Zimmer Holdings matter was crafted entirely at Christie’s discretion. The companies under investigation faced a difficult choice: either agree to Christie’s terms and pay the substantial fees charged by the monitors that he appointed, or face prosecution. Also, fee arrangements for corporate monitors are usually secret; Zimmer Holdings took the rare step of disclosing its compensation arrangement with Ashcroft in an SEC filing.

Christie said he had nothing to do with arranging Ashcroft’s fee, which he justified as a “real bargain” for taxpayers. However, Christie used the hefty monitoring fees the companies agreed to pay as an excuse not to impose any criminal fines. Is it really a “bargain” if, instead of paying back the government, companies who cheat the public are instead forced to enrich the lucky few who have connections to a U.S. Attorney?

While my first reaction is disbelief I know better after 7 years with this administration in office. Mafia types must be jealous. It looks and smells like a shakedown to me. What a scam! The two congressmen from NJ have probably seen shakedowns before and I certainly hope they succeed in their call for an investigation